What to watch for on Thursday, August 11:
The USD slumped on the back of US inflation figures, ending the day lower against major rivals. The consumer price index for July contracted more than expected, falling to 8.5% year-on-year from 9.1% in June. Most importantly, the core reading held steady at 5.9%, better than the rally to 6.1% expected.
Likewise, the Chinese consumer price index rose less than expected in July, at 2.7% yoy from 2.5% in the previous month, but below the 2.9% expected. In the same period, the producer price index rose 4.2%, well below the previous 6.1% and the 8% expected. Germany confirmed the CPI for July at 7.5% y/y.
Equity markets soared on the news, as stocks rose on relief from declining US inflation, which should mean a less aggressive tightening. Meanwhile, tightening US government bond yields initially fell but quickly returned to pre-release levels, with 10-year Treasury yields currently trading at 2.78%.
US Federal Reserve officials spoke on the matter. On the one hand, Chicago Fed President Charles Evans said that he does not expect the Fed to be done with rate hikes and that he expects the funds rate to peak at 4%. He also expects rates to rise this year and next. On the other hand, Minneapolis Fed President Neel Kashkari said that the idea of cutting interest rates early next year is unrealistic, but warned that the country could enter a recession in the near future.
The EUR/USD pair topped out at 1.0368 and is now struggling to hold the 1.0300 threshold. GBP/USD is trading around 1.2220. Commodity-linked currencies were the best performers amid the equity rally, with AUD/USD at 0.7080 and USD/CAD at 1.2780.
Haven currencies also appreciated against the USD, with USD/CHF trading at 0.9426 and USD/JPY trading at 132.90.
Gold was the worst performer, ending the day lower at $1,789.30 a troy ounce. Crude oil prices benefited from the strength of Wall Street and recouped early losses. A barrel of WTI is currently at $91.60.
Source: Fx Street
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